****

*The Real McCoy?*

Are you familiar with the saying, “A good deed never goes unpunished?”.  It may be true.  I was traveling on TDY last fall and stumbled upon an employee group organized to raise funds for local orphanages.  Some of the members took the time to show me pictures of the children.  Unfortunately, it was my responsibility to inform post management that the organization needed to disband or establish itself under the umbrella of the employee association at post.    

Employee groups (sometimes referred to as spousal groups) have existed at many posts overseas for a number of years.  It is believed that their beginnings were likely informal social gatherings of dependents at post.  Over time, many of these groups began to play expanded roles taking on new shape and meaning.  Some assumed the role of organizing and sponsoring fundraising activities to provide the Community Liaison Office with the financial resources to host community events.  Still others, lacking a CLO coordinator at post, began to fundraise in order  to  subsidize  community events.   In 

the case described above, proceeds from fundraising  activities   provide  support  to

local communities in need.

In their fundraising efforts, employee groups identified the need to secure additional resources in the form of space, manpower, and funding.  As a result, some groups began purchasing and reselling logo and  gift   merchandise.  Others began holding happy hour events.    Space  and  other resources were made available at many posts.  Boards of Directors were formed, often a mix of dependents and USG employees.  Operating documents came into being and bank accounts were established.   Ad-hoc accounting and filing systems were put into place if any were done at all.  Yet none of these groups acquired insurance policies or ensured that funds were properly safeguarded.

So, what’s wrong with this picture?  Maybe nothing.  Maybe not.

Section 31(a) of the State Department’s Basic Authorities Act gives the Secretary of State the authority to “authorize and assist  in  the  establishment,  maintenance, 

and operation by civilian officers and employees of the Government of non-Government-operated services and facilities at posts abroad, including the furnishing of space, utilities, and properties owned or leased by the Government for use by its diplomatic, consular, and other mission and posts abroad.”.  Regulations carrying out this legislation are contained in 6 FAM 500.  In fact, 6 FAM 500 regulations provide the only authority that allows the USG to support employee organizations by furnishing space, utilities, and other forms of logistical support.  These authorized groups are generically referred to as employee associations.  

So, how do employee associations differ from employee or spousal groups?  In some instances, the only difference is the authority, or apparent lack thereof, to exist. Some of these groups are performing employee association functions (e.g., procuring and reselling goods, organizing community events, hosting happy hours, etc.) but are not authorized to do so.  Some are doing so with space and utilities provided by post – putting the USG at risk since employee groups are not appropriately insured.  And worse, those individuals who are performing these good deeds may be putting themselves at personal risk should a lawsuit be filed.  They are not covered by any bonding or liability insurance and the USG cannot indemnify them.  Employee associations exist, in part, to solve these kinds of issues.  

As more and more of these organizations are identified, we have met with great resistance to right the wrong.  Much of this resistance stems from the fact that employee groups are concerned with the loss of fundraising revenue as employee association revenue is subject to an annual assessment by the Central Commissary and Recreation Fund.  Recent discussions with the Department’s Family Liaison Office yielded similar concerns given that fundraising efforts often benefit CLO programs at post.  As such, we will be seeking approval from the Central Commissary and Recreation Fund Board to exempt certain fundraising revenue from the annual assessment.  A notification will be provided to the field pending the  Board’s review of the request.

Although the financial aspect is troubling, some employee groups also struggle with the loss of control over the activities as groups are folded into existing employee associations.  The elected employee association Board of Directors assumes responsibility for monitoring all association activities and must therefore have the corresponding authority to do so.  The employee group’s board may be appointed by the association’s Board of Directors to serve as a subordinate fundraising committee.  The committee could then make recommendations to the Board on fundraising activities and how funds should be disbursed.  

Other concerns may exist.  As such, it is our goal to ensure a smooth transition by developing guidelines for doing so.  Guidelines will be issued in the coming months to assist posts in identifying those groups that will be affected and how transitions should occur.  

In the interim, we encourage your questions.  Please contact CR Director Diane De Vivo or Operations Team Leader Annie Cocchiaro by phone (202-663-1330), fax (202-663-1329, or email (crlogon@erols.com).

*The above article was written by  CRonicle Editor Annie Cocchiaro.*

Beg, Borrow, or Steal?

Financing Capital Improvements

I like to get cooled off in the hot season, and I have a taste for ice cream.  The only problem is that I quickly get debilitating ice cream headaches.  You know, the kind where your brain freezes from ice cream overload?  What I want is to be cooled off.  Some of the people like ice cream some of the time, but in the hot months all of the people want to be cool all of the time.  

A good ice cream maker and a new air conditioner cost about the same amount of money to purchase and install.  The difference in the two, from a financial perspective, is that the ice cream maker will directly generate revenues against which the costs can be charged.  The costs of an air conditioner are real, but its benefits are harder to calculate.  You might even say they are nebulous.  Either way, if you try to charge people for cold air, they’ll think you are blowing smoke.

Americans like their ice cream to be only so soft.  Without a good air conditioning system, members are going to stew.  “Build it and they will come” is the old adage about baseball parks.  Install a new air conditioning system at the American Club and members will stay and eat ice cream all day long.  

If the association is flush with cash, you could simply write a check and chill out.

Not an option?  Well, this is where the begging, borrowing or stealing comes in.  As associations tend to have a captive market, you could turn to the membership to finance a new air conditioning system by increasing member fees and deposits.  Personally, I prefer an increase in fees over deposits due to the fact that it may be some time before you realize adequate cash flow to allow for the return of deposits.    

Borrowing may be a good alternative as interest rates remain low.  Employee associations are not prohibited from acquiring loans from banking institutions.  Loans for capital improvements may also be available from the Central Commissary and Recreation Fund.  Applications are available from the CR intranet site (http://aoprcr.a.state.gov) via the Department’s internet explorer.  

Central Fund loan interest rates are set at the rate of interest of U.S. Treasury bonds corresponding to the term of the loan.  For example, if the term of the loan is for three years, the interest will be set at the three year Treasury bond yield.  The date for establishing the rate will be the date of the loan application.

Making the case, in the form of a business plan for the funds being requested, can be simplified when the item being financed is known to generate “X” dollars of revenue over a certain period while you incur “Y” costs.  It is, of course, the net profit from that activity that allows for the financing.  From a cashflow perspective, research will be required to determine if the venture is feasible.

Central Fund loan applications are reviewed in CR with recommendations for approval forwarded to the Central Commissary and Recreation Fund Board or Finance Committee (depending on the amount of funds being requested).  Loan requests have been heavily scrutinized in recent months given that one former employee association defaulted on a loan and another came close to default.  As a result, we have placed stricter requirements on the approval of loans and believe fewer loans may be approved in the future.

Being a Certified Public Accountant from Minnesota, where I was required to take an ethics exam, I won’t even suggest methods of stealing.  Robbing Peter to pay Paul does happen, but generally gets you into trouble with Mary.  

*The above article was written by CPA and CR Accountant Chuck McShane.*

***Employee Association Manager of the Year Award***

In April, Ms. Willemieke McCarthy of the American Community Association (AmCom) in Addis Ababa, Ethiopia was selected as the 2002 Manager of the Year (based on her performance during 2001).  In her nomination, the AmCom Board of Directors cited Willemieke for restoring the association to financial health, strengthening internal controls, increasing the association’s membership base through successful implementation of the Third Country Diplomat program, and increasing sales by 22 percent over the previous year.

Congratulations to Mr. Edward Brown of the United States Employee Association (USEA) of Islamabad, Pakistan and Ms. Ingrid Romero of the Post Employee Services (PES) association of Bogota, Colombia for second and third places, respectively.

The remaining nominees in alphabetical order by post are:

Leo Parpart – Cameroon

Carolyn Spicer – Dar es Salaam

Annette Nuttall – Dhaka

Cheryl Ross – Kuwait City

Tara O’Day – N’djamena

Carmen Jimenez – Panama City

Robin Huyett – Quito

The annual awards process is announced each January.  Nominations are submitted by Boards of Directors  based upon the manager’s performance for the calendar year just prior.  The winners receive framed certificates and a cash award.  Copies of this year’s nominations are available from CR upon request.

Congratulations again to the winners and nominees for making 2001 a great year!

As you can see, the CR mailbox is still a bit empty.  At the time of this writing, we are a few short weeks before the June 1 submission of the  compliance certification.  The May 1 deadline for the submission of the questionnaire, association prepared financial statements, and audit report has come and gone.  Unfortunately, a number of employee associations remain delinquent in submitting one or more of these reporting requirements.  We encourage employee associations to meet these deadlines and keep us informed of unexpected delays.  The information we gather from these reports assists us in supporting you.  For those associations currently delinquent in submitting one or more reports, please contact us and request an extension of the due date.  We are available by phone (202)663-1330, fax (202)663-1329, Department email, or via the internet (crlogon@erols.com).  

*Please,*

*Tell Us Who You Are....*

On occasion, CR receives unidentifiable financial reports, questionnaires, inquiries for guidance, etc. from employee associations.  What some may not know is that there are a number of employee associations using the same acronym and/or same name.  Therefore, sending correspondence from the “AEA” or the “American Embassy Association” may not tell us much .  Did you know there are more than a dozen employee associations using the acronym “AEEA”?  Please remember to include city and country on all correspondence.

*Operating Documents*

##### Why all the fuss?!?

Per 6 FAM 551.1, “All employee associations must operate under a charter approved by its Board of Directors and the Assistant Secretary for Administration.”.  Employee associations have no authority to operate in the absence of an approved charter.  In addition, 6 FAM 552 and 525 mandate the requirements for approved bylaws and license agreements.  It is important that documents are current at all times.

*How do you know when an*

*update or revision is required?*

***THE CHARTER***

As you may know, the charter provides the association’s legal name and also outlines all services and activities to be provided.  Therefore, a revised charter is required...

· When a name change takes place (even if the change is so slight that the acronym remains the same).  Also, we will ask for confirmation that all legal records and documents have been changed accordingly.

· **Prior to** the implementation of new services/activities.

· When an association is approved for mini association status.

It is also a good idea to revise the charter when a significant number of services/activities are being cancelled or when the document is simply outdated due to changes in the CR boilerplate.

***THE BYLAWS***

The bylaws primarily provide designated membership categories and the corresponding privileges, parliamentary procedures and Board composition.  

The bylaws should be revised when...

· A name change takes place (even if the change is so slight that the acronym remains the same).  

· The employee association conducts branch operations at any place not listed in its current bylaws.

· Membership categories and/or changes in the privileges accorded to specific membership categories.

· Any changes in provisions pertaining to the Board of Directors, elections, meetings and the conduct of meetings. 

Bylaws may also be required as a result of a policy change that was previously included in the bylaws.  We discourage the use of the bylaws for documenting specific policies such as fee/deposit structures for this reason.

###### THE LICENSE AGREEMENT

The license agreement (in the past referred to as a Memorandum of Understanding) primarily outlines logistical support provided by the USG, as well as the employee association’s location on USG owned or leased property. 

The license agreement must be revised when...

· A name change takes place (even if the change is so slight that the acronym remains the same).  

· The terms for reimbursement change.

· The location of the employee association’s facilities change.

A revised license agreement will also be required if the employee association takes over the operation of USG owned or leased TDY quarters.  Special language is required for employee associations operating USG owned or leased TDY quarters.  

# Why are these things so hard to get approved?!?

They’re not.  Or, at least, they shouldn’t be.    

Boilerplates   are   provided for each of the documents.  The boilerplates have been approved by an Attorney Advisor in the Department and contain provisions designed to specifically protect the association, its officers and members, as well as the USG.  As such, we become sticklers when some of the standard language is altered.  But, it’s for your own protection!

# So, how do we get started?

1. Obtain the appropriate boilerplate(s),  All boilerplates are available from our intranet site.  Access to the site is via the Department’s Internet Explorer.  From the Department of State homepage, click on “Bureaus and Offices” and then “Administration”.  Scroll down and click on “Office of Commissary and Recreation Affairs”.  The boilerplates may be found in the “Library” link.

2. Make all the appropriate changes.  For the charter, this should simply be a change in services/activities and/or the association’s name.  For the bylaws, Sections 3-6, 9, 13-15 and 17-18 of the boilerplate **should remain as written**.  For the license agreement, paragraphs 5-6 and 8-12 **should remain as written**.

3. Forward the document via email or fax for preliminary review.

4. Upon CR review, we will either let you know there are required edits or we may ask for clarification.  The documents should be resubmitted with any edits and appropriate clarification.  Once we reach an acceptable document, we will inform you.  

5. In the case of the bylaws, a membership vote must be taken.  

6. The final step will be to submit the original, signed document.

When forwarding the original document, please ensure the designated signatures have been obtained.  For the charter, the signatures of at least two Board members and the Principal Officer or his/her designee to the Board of Directors is required.   The bylaws must contain the signatures of at least three Board members.  The license agreement should be signed by the appropriate post management and Board of Directors representatives.

Upon final approval, copies are provided to post.  The original documents remain on file in CR.  Copies are always available upon request.

*The above article was written by CR Operations Officer Christy Chesnutt.  Please contact the CR Operations Team if you have any questions regarding your operating documents.*

**Here We Grow....**

*Welcoming the newest CR employee*

The newest edition to the CR Operations Team, Christy Chesnutt is the former General Manager of the American Employees Association (AEA) in Vienna, Austria.  Prior to that, Christy served as the AEA’s bookkeeper.  She is a native Texan and is currently a senior at the University of Maryland studying for her Bachelor’s  Degree in Accounting.  Christy is engaged to a Foreign Service Officer she met in Vienna and is currently planning a November 2002 wedding.

***The next issue of The CRonicle will be published in August 2002.***

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